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Stocks steady ahead of the Fed

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Once again a late morning rally has stocks back near the unchanged levels as traders attempt to position themselves ahead of today's FOMC announcement on interest rates. While traders "want" some type of action and look for a break from recent session's trading ranges, it looks like we're going to have to wait until later this afternoon.

This morning's retail numbers and upside earnings from Wal-Mart (NYSE:WMT) $50.40 +4% have the Retail HOLDRS (AMEX:RTH) $76.40 +3.02% hanging on to first place in today's sector winners category. Other sector gainers have the Oil Service Index (OSX.X) 82.62 +1.69%, Broker/Dealer Index (XBD.X) 394 +1.84% and North American Telecom (XTC.X) 351 +1.84% showing some renewed strength.

Sector losers has the Biotechnology Index (BTK.X) 372 -2.7% trading lower on profit taking. Biotech HOLDRS (AMEX:BBH) $87.10 -2.13% edges off the $90 resistance level lead by weakness in Sepracor (NASDAQ:SEPR) $5.30 -6.02%, QLT Inc. (NASDAQ:QLTI) $9.40 -5.52% and Celera Genomics (NYSE:CRA) $9.80 -5.31%, all 3 hovering just above their 52-week lows. Sector bellwether's have Amgen (NASDAQ:AMGN) $47.10 -1.83% and Biogen (NASDAQ:BGEN) $36.19 -2.66% pulling back from recent rally highs.

Stocks in the news today have shares of worldwide theme park operator Six Flags (NYSE:PSK) $6.12 -51% getting pummeled after the company posted Q2 earnings that missed estimates by 9-cents a share (reported EPS of $0.08 versus consensus of $0.17) on revenues that fell 2.4% year-over-year to $347.8 million versus the $371 consensus.

Also weak on sympathy of Six Flags earnings are shares of Cedar Fair (NYSE:FUN) $21.78 -6.76%.

This weekends announcement and yesterday's Wall Street Journal speculation that UAL Corp. (NYSE:UAL) $2.84 -25.26% has some airline contractors like Boeing (NYSE:BA) $38.20 -5.67%, United Technology (NYSE:UTX) $64.37 -5.96% and Goodrich Corp. (NYSE:GR) $22.74 -5.83% under selling pressure.

Boeing Chart - $1 box

With airlines showing weakness, shares of Boeing have been recently mentioned as bearish in the OptionInvestor.com market monitor. With a bearish vertical count of $32 and a series of consistently lower highs since April, the stock looks like it continues to be under distribution. A break of $37 could send the stock sharply lower and have the $32 bearish count in play. With many airline stocks violating their September lows, many airlines may be tightening their purse strings on new plane purchases in the months/year ahead. First sign of strength for BA would be a trade at $43, which would be a double-top buy signal. Something the stock has not been able to generate since early February (after red 2).

Jeff Bailey
Senior Market Technician
Option Investor


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